Correlation Between Virax Biolabs and ACADIA Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Virax Biolabs and ACADIA Pharmaceuticals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Virax Biolabs and ACADIA Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Virax Biolabs Group and ACADIA Pharmaceuticals, you can compare the effects of market volatilities on Virax Biolabs and ACADIA Pharmaceuticals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Virax Biolabs with a short position of ACADIA Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virax Biolabs and ACADIA Pharmaceuticals.

Diversification Opportunities for Virax Biolabs and ACADIA Pharmaceuticals

0.74

Correlation Coefficient

Virax Biolabs  ACADIA Pharmaceuticals

Poor diversification

The 3 months correlation between Virax and ACADIA is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Virax Biolabs Group and ACADIA Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACADIA Pharmaceuticals and Virax Biolabs is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Virax Biolabs Group are associated (or correlated) with ACADIA Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACADIA Pharmaceuticals has no effect on the direction of Virax Biolabs i.e., Virax Biolabs and ACADIA Pharmaceuticals go up and down completely randomly.

Pair Corralation between Virax Biolabs and ACADIA Pharmaceuticals

Given the investment horizon of 90 days Virax Biolabs Group is expected to under-perform the ACADIA Pharmaceuticals. In addition to that, Virax Biolabs is 1.32 times more volatile than ACADIA Pharmaceuticals. It trades about -0.1 of its total potential returns per unit of risk. ACADIA Pharmaceuticals is currently generating about -0.03 per unit of volatility. If you would invest  2,422  in ACADIA Pharmaceuticals on February 22, 2024 and sell it today you would lose (840.00) from holding ACADIA Pharmaceuticals or give up 34.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Virax Biolabs Group  vs.  ACADIA Pharmaceuticals

Virax Biolabs Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virax Biolabs Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Virax Biolabs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ACADIA Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ACADIA Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Virax Biolabs and ACADIA Pharmaceuticals

The main advantage of trading using opposite Virax Biolabs and ACADIA Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virax Biolabs position performs unexpectedly, ACADIA Pharmaceuticals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ACADIA Pharmaceuticals will offset losses from the drop in ACADIA Pharmaceuticals' long position.

The idea behind Virax Biolabs Group and ACADIA Pharmaceuticals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.